bill from a debt collectorHaving a debt in collections is no fun for many reasons, but most of all because debt collectors have the potential to flip individuals’ lives upside down. Everyone, from comedians like John Oliver to government bureaus like the Consumer Financial Protection Bureau (CFPB), has noted the degree of misinformation and abuse that can go on in the debt collections process. While many debt collectors abide by the rules, the fact is that not only does fraud exist, but legitimate companies can also demand non-existent or out of date debt. As a consumer, the most important thing you can do is to try to understand the debt collection process and know your rights. That’s why below we detail the considerations you should take into account whenever you’re dealing with a debt collector.

Why is a debt collector even contacting you?

You might first be wondering why someone would even have to deal with a debt collector anyway. Debt collectors are individuals, usually part of a collection agency or in-house department, who either manage debt on behalf of a creditor or who purchased debt from a company or creditor, sometimes for pennies on the dollar, and are collecting the owed debt to profit. Knowing what type of collector is contacting you is important because that might determine the type of records the collector has access to, as well as the potential accuracy of those records. For example, if you’re getting a call from an in-house collections department representing your credit card issuer, they will likely be able to look up the exact missed payments that sent your file to their department, which can answer a lot of your questions. On the other hand, a third-party collection agency will not be able to provide such information, which means you’ll need to contact your credit card issuer, your doctor’s office or wherever they claim the debt accumulated. If you are working with a third-party agency, it’s best to look into the debt before making a payment plan because in some cases, debt buyers could be purchasing second-hand — or even third-hand — debt that is no longer owed or past the statute of limitations, the legal length of time a collector is allow to collect (or sue) for the back-owed money. This type of undead, mindless zombie debt, which puts consumers on the hook for something they don’t owe, is something we’ve talked about before.

What should you be aware of when talking to a debt collector?

To help you not only avoid falling for a scam, but also paying a debt you aren’t on the hook for, here are some questions you should ask yourself before engaging with any debt collector.

1. Is the collector who they say they are? You might owe money, but you and your debt collectors might not be the only ones who know this. As we mentioned last year in an article about the IRS’ decision to use private debt collectors, if a caller seems too eager to get you to pay immediately or threatens you in any way, it’s usually a telltale sign that something is wrong. Most phone scams are hallmarked by intimidation and immediate calls-to-action from the scammer, while real debt collectors will patiently talk you through your concerns and work with you to create a payment plan.

2. Is the debt within the statute of limitations? In every state, there exists something called the statute of limitations which specifies how long a debt collector may not only ask for repayment, but also take legal action against someone. If you’re being pursued for debt beyond the statute of limitations, you can actually sue the collector as a result.

3. Is the debt mine? Sometimes, either due to error or intentional deception, you might be approached to pay a debt that isn’t yours. If you’re working with a third-party collection agency, they will likely not know all the exact details about the debt (e.g., the exact doctor visit they’re collecting for), which means you’ll have to contact the business or organization that sent your debt to collections or consult your records. Once you’ve confirmed the debt is legitimate, you’ll want to also verify it’s within the statute of limitations.

4. Is the amount and interest owed accurate? After you’ve confirmed the legitimacy of the debt, you’ll want to make sure it’s for the correct amount. Even if the debt is legitimate, the owed amount that the collector initially tells you may not be. As such, you’ll want to consult your records. Something to note is your debt went to collections because it was unpaid, which means you will likely have a missed-payment fee or two that will bump up the owed balance. Even so, you should still be able to confirm the original owed amount (before it was sent to collections), as that will include any of these fees.

5. Is the debt one you’ve already paid? Again, through either error or ill intent, a record of a debt you already paid can reappear and continue to haunt you. As such, you’ll want to make sure to keep good records so that you can demonstrate what you have and haven’t paid and review these records to confirm a debt it still unowed.

The CFPB points out that you are legally entitled to ask for a debt collector’s proof regarding their claims about your debt. This means asking for details about what collection agency they’re working with and requesting a written statement regarding the debt they’re contacting you about (often called a validation notice). Legitimate debt collectors will comply with your request and respond to any other questions you have, so if you ever receive contact from a debt collector who does not want to provide you with any of this information, there’s a good chance it’s a scam and it should be reported to the CFPB.

What rights do you have?

If you’re working or dealing with a debt collector, you should know that you have a number of rights as to how they can contact you and handle your case. The Fair Debt Collection Practices Act (FDCPA) gives you these specific rights, some of which include:

  • The right to not be contacted at unusual times (before 8:00 a.m. or after 9:00 p.m.)
  • The right to request the collector to stop contacting you with a cease-and-desist letter (but keep in mind, this doesn’t mean you can’t be sued or have a new collector contact you if your debt is sold).
  • Within five days after the initial contact with the collector in connection with any debt, the collector must send the consumer a written notice containing the amount of the debt, the name of the creditor to whom the debt is owed and a statement that unless the consumer disputes the debt within 30 days, the debt will be assumed to be valid by the debt collector.
  • You have 30 days to dispute the debt.
  • Collectors cannot contact you at work.

This list isn’t complete, however it offers general insight into how the FDCPA works and some rights you have as a result of it. You can read the full list of rights here.

Can you negotiate with debt collectors?

If you have a legitimate debt with a collector, you can negotiate a payment plan with them. Ideally, you’ll want to negotiate debts with the original creditor or business before the debt ends up in the hands of a collection agency or debt buyer, but if you find yourself with a debt in collections, you do have some negotiation options. The specifics of negotiation somewhat depend on your situation, but the CFPB details how you should begin negotiations. Be aware that negotiations aren’t a bad thing, and in many cases, as long as collectors get some fraction above what they paid for the debt, they will be happy and willing to negotiate. It’s not likely you can negotiate full forgiveness, but any reduction you can get will be useful in helping you pay. If the debt isn’t yours, remember you can request in writing that the debt collector clarify more about the debt, which they are by law required to respond to, as we noted above.

For more information about managing your debt and maintaining your credit, keep reading out personal finance blog.